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Cetera Advisors: Investors Should Know its Record of Complaints and Disputes

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author
February 24, 2023 at 7:26pm

Cetera Advisors (CRD #: 10299) has a record of regulatory fines that investors should know about. These disclosures include allegations that the brokerage firm allegedly failed to supervise certain brokers and did not sufficiently safeguard private client information.

Cetera Advisors Background

Cetera Advisors is part of Cetera Financial Group, which is a network of independent retail firms, including Cetera Investment Services and Cetera Financial Specialists. The firm’s headquarters are in Denver, Colorado. Since forming in 2012, the firm has grown to over 810 branch offices and over 1,600 registered representatives.

Can I Sue Cetera Advisors?

Yes, but probably not in civil court. Most brokerage firms require investors to sign a pre-dispute arbitration clause. This clause compels investors to resolve any disputes with brokerage firms through FINRA arbitration rather than a civil case. FINRA arbitration is meant to be a quicker and more straightforward process than a civil case, but the process still comes with potential pitfalls for investors.

What Does Cetera Do?

Cetera Advisors offers both brokerage accounts and investment advisory accounts.

  • According to the Customer Relationship Summary (CRS), investors may prefer brokerage accounts if you plan to buy and hold trades for long periods of time.
  • Cetera Advisors discloses that they do not provide ongoing monitoring of investments in brokerage accounts.
  • Many financial professionals offer both investment advisory and brokerage services. They may have an incentive to recommend you purchase investments in a brokerage account based on the commissions they receive.
Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.

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Cetera Regulatory Actions

Cetera Advisors has 22 disclosures on its detailed BrokerCheck record. Investors should know these disclosures, which include regulatory and civil actions.

Here are three of the most recent regulatory actions:

1.     Alleged Exposure of Private Client Information

According to a Cease-and-Desist Order from August 30, 2021, Cetera Advisors allegedly violated Rule 30(A) of Regulation S-P–the “Safeguards Rule” with respect to protecting personally identifiable information.

Allegedly, between November 2017 and June 2020, email accounts of over 60 Cetera entities’ personnel were taken over by unauthorized third parties. This allegedly resulted in the exposure of thousands of customers’ personally identifiable information. None of the compromised email accounts had multi-factor authentication turned on, as required by Cetera’s own policies.

As a result, Cetera consented to a $300,000 fine.

2.     Cetera Allegedly Failed to Supervise

On December 15, 2020, Cetera consented to the findings that it failed to supervise certain outside securities transactions of dually registered representatives who were associated with outside advisory firms. FINRA further alleged that the firm did not have the information necessary to perform a suitability review. Firms must perform suitability reviews to ensure certain transactions fit their customer’s financial goals and risk tolerance.  

Cetera consented to pay a $150,000 fine.

You can read a copy of the Acceptance, Waiver, and Consent (AWC) agreement here.

3.     SEC Complaint Regarding Mutual Fund Fees

According to an SEC complaint filed on April 29, 2020, the Securities and Exchange Commission alleged that Cetera Advisors and Cetera Advisor Networks “regularly and repeatedly put their financial interests ahead of their clients” and received $21 million for the firms as a result.

Brokers at the firms allegedly recommended more expensive mutual fund investments when they knew lower-cost alternatives were available. The firm also allegedly received third-party broker-dealer compensation in return for their recommendation of certain mutual funds. Cetera representatives allegedly failed to disclose this conflict of interest.

4.     Repayment of Mutual Fund Fees

Cetera consented to a fine on May 3, 2017, following the allegations that the firm failed to inform customers of available discounts for mutual funds. Class A shares of mutual funds are often discounted if an investor purchases shares from the same family of mutual funds.

The firm was censured and required to pay at least $628,040 in restitution to customers.

You can read a copy of the AWC here.

Cetera Advisors Look Up

Do you know if your investors have been the subject of investor disputes or regulatory actions? Find out by looking them up on BrokerCheck. Below is a list of Cetera brokers who have disclosures on their records.

If you lost money after working with any of the following brokers, reach out to our investor lawyers right away:

 

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Types of Financial Products at Cetera

Cetera Broker Fees

Cetera Advisors discloses its fees in its CRS. Fees vary depending on the type of account.

The firm charges the following fees for brokerage accounts:

Sales commissions associated with each transaction.

  • Stocks and ETFs come with sales charges that depend on the quantity of the transactions, or the dollar value of the transaction, or some combination of both.
  • Bonds and structured products may include sales charges called “mark ups.” These are included in the price of the security and are often not clear to the investor.
  • Some investments, such as mutual funds and annuities, impose internal operating fees in addition to fees charged by Cetera Advisors.
  • Variable annuities and variable insurance products come with sales charges that are a percentage of the amount invested. These investments also come with surrender fees if you sell within a certain period.
  • Brokers may earn ongoing compensation for mutual funds, annuities, and alternative investments.

Brokers should always communicate the risks associated with investments, especially riskier investments like variable annuities and alternative investments.

Conflicts of Interest

Cetera Advisors states that it clears its transactions through Pershing LLC. When Pershing is the executing broker-dealer, Cetera reveals that the firm may not be able to achieve the best price possible for the transaction. Furthermore, Cetera earns a portion of the fees associated with that transaction.

Since they earn a fee on transactions in brokerage accounts, Cetera financial professionals are incentivized to encourage investors to trade more often.

Lost Money After Working with a Cetera Broker?

Our securities attorneys provide free case evaluations. Speaking with our lawyers will help you determine what steps to take next. Call (877) 600-0098.